Current Market Update

April 23, 2020

We thought it would be helpful to make some comments and observations during these unusual circumstances that we all are experiencing. We will look at the big picture, then bring it down to the personal level of what you may want to consider doing to take advantage of the current events.

After a good year in 2019 in bond and stock markets with almost no volatility, we are now experiencing the opposite. External events that are affecting this are the concerns of COVID -19 virus and a battle for more oil market share between Saudi Arabia and Russia. The latter is resulting in lower oil prices that are expected to stay low for some time. The federal government is trying to stimulate the economy by infusing money into the system and to consumers and business. Interest rates are low and expected to be low for a period of time. This should keep inflation low as well. These will all be helpful now and when things start to recover.

The future is always uncertain and present events can cause alarm on both health and financial fronts. We know that every crisis has a beginning and an end and that people behave in somewhat predictable phases. The first phase is panic – which is where we probably are now. Markets indiscriminately selling any company stock or bond no matter how sound the company is or what is does. This causes opportunities that fund managers can take advantage of as prices become dislocated from long term reality. The second phase is the relief phase – people hope or see signs things may start to getting better. The third phase is despair phase when events cause things to get worse or the stock markets go down more. People can’t stand it anymore so they make a decision at an emotional time to sell their shares, resulting in a real loss – exactly at the wrong time.

  • So how do we avoid finding ourselves in the despair phase?
    a. Recognize that investor behavior is a big reason for poor investor returns. It’s the old axiom of “stay diversified across many asset classes and sectors in the economy. If you need money in the short run, have a smart place to take it from that doesn’t hurt your long term plan.” These days, that place is cash or certain bond funds.
    b. Make sure your money is in line with your risk tolerance. We have tools available to review this with you.
  • What are some specific strategies you can consider in this current environment?
    a. If you still have a mortgage or other debt, contact your lender to see if it makes sense to refinance at the current rates.
    b. Review the possibility of converting some IRA dollars to a Roth IRA. Present tax rates are expected to change and probably go up in 2026. Generally speaking, you are now converting assets that have declined in value so upon conversation the taxes should be less due to the value per share being down.
    c. We have software that looks at your income streams to analyze the most efficient way to take income. This helps answer the question of where to take income in upcoming years to be most efficient.
    If you have cash that is not needed for a few years, we can help you construct a strategy to invest in your stock or bond funds over a period of time to take advantage of lower prices.
    e. Also, consider rebalancing your accounts. We have managed portfolios that automatically rebalance the holdings every quarter based on your risk tolerance. This can decrease volatility over time and keep you centered in your risk/reward range.
    f. Revisit your overall financial plan. We have state of the art financial planning software that looks at your comprehensive situation, and helps answer the question, “How am I doing? Should I make any changes?” It reviews assets/ liabilities/income/expenses/insurances/tax planning/asset mix and estate planning areas. Many of you are engaged in this already. If that is something you want us to help you with, let us know.

The world has seen similar external shocks before with varying degrees of length. At some point, COVID – 19 cases will peak and start declining. The more prices go down the closer we probably are to the end. At some point, prices get ridiculously cheap, which are fanned mostly by fear (remember that the number of shares we have in our accounts have not changed). Fund managers will be selective in taking advantage of buying into good companies at discounted prices.  The planet is still full of consumers who will continue to need goods and services that only companies can provide to them.

We are all in this together and we will continue to be here to advise and assist you. Be sure to call if you have questions or would like to set up a phone meeting. In the next few weeks, we will be sending out information on additional technology we are using will make doing business with us easier for you. We will also send a recap of how the SECURE ACT of 2019 will affect your future planning strategies. 

Stay healthy!


Using diversification as part of your investment strategy does not guarantee a profit or protect against a loss. Dollar cost averaging/Systematic Investment plan] does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.

Keep in mind that rebalancing may have tax consequences and transaction costs associated with this strategy. If you sell investments that are held in a taxable account, you will have to pay taxes on any capital gain resulting from the sale.

Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.

This blog is meant to be general, and it is not investment or financial advice or a specific recommendation of any kind. Opinions and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated. Please consult your financial advisor before making financial decisions.